In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory.
The lower of cost or market concept first became part of normal accounting practices in England during the nineteenth century.
During the nineteenth century, lower of cost or market was not common practice for valuation of factory inventory in the United States.
Despite the criticism, lower of cost or market quickly caught on in practice and by the early twentieth century was described as the most commonly accepted method for inventory valuation according to the Report of the Special Committee on Co-operation with Stock Exchanges.
Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.